Dollar Soars on Warsh's Hawkish Inflation Warning

The US dollar rallied on August 28 as Federal Reserve chief Kevin Warsh emphasized the need to combat high inflation in his speech at the Jackson Hole symposium.

Warsh stated that 'we must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do.' He noted that US inflation stands at 3.7 percent, nearly double the Fed's target of 2 percent, and expressed concerns about the potential persistence of high energy prices due to the Iran war.

The speech was seen as more hawkish than expected, with yields on short-term US Treasury bonds spiking in anticipation of a higher Fed rate.

Futures markets raised the odds of a rate hike in September, while the dollar gained against major currencies such as the euro and yen.